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 WASHINGTON, Aug. 25 /PRNewswire/ -- The Federal National Mortgage Association (Fannie Mae) (NYSE: FNM) today announced it will invest in a $50 million loan commitment made by Residential Funding Corp. (RFC) to a partnership including the California Public Employees Retirement System (CalPERS) and Hearthstone Advisors, that will finance the acquisition, development, and construction of more than 1,550 affordable single- family homes throughout California.
 The loan commitment between Fannie Mae and the Minneapolis-based RFC will finance new single-family home developments in California intended primarily for first- and second-time home buyers.
 Under the plan, loan funds can be used to build homes where the sales price will allow for a mortgage that does not exceed Fannie Mae's 1993 individual loan limit of $203,150. The maximum home sales price, assuming a borrower obtains a Fannie Mae-eligible individual mortgage with a 5 percent down payment, will be $213,840.
 Kathleen Brown, treasurer of California and a trustee of CalPERS, said, "This uniquely structured public-private partnership will not only secure attractive returns on our investments for members of the retirement system, but also provide critical financing to help build affordable housing in California," said Brown, a member of the PERS board. "It is an example of the kinds of creative investment strategies we are developing to help create jobs and improve California's long-term quality of life."
 To manage the plan, CalPERS has formed a limited partnership with Hearthstone Advisors of San Francisco. Hearthstone is one of the most active of five investment advisors picked by CalPERS under a $375 million equity initiative to invest in new home construction within California. Hearthstone currently has commitments to build more than 2,000 homes in the state.
 Under the agreement, Fannie Mae will purchase from RFC, the lead agent, a 50 percent participation interest, up to $25 million, in acquisition, development, and construction (ADC) loans made to the partnership. The pilot program, which was developed with the assistance of the National Association of Home Builders, helps provide lenders a secondary market outlet, through Fannie Mae's investment, for ADC loans made to builders. This, in turn, provides additional funds to encourage the creation of more affordable housing developments.
 "The National Association of Home Builders appreciates Fannie Mae's efforts in creating the pilot construction loan program during the credit crunch," said J. Roger Glunt, president of the 165,000-member association. "Fannie Mae and RFC's commitment to CalPERS shows that the program continues to stimulate important contributions to the production of affordable housing."
 "This initiative is part of our unshakable commitment to affordable housing in California, and is particularly appealing because of RFC's financial strength, as well as the solid experience and financial backing of the CalPERS/Hearthstone partnership," said Larry Dale, executive director of Fannie Mae's National Housing Impact Division. "The transaction structure also involves Fannie Mae as an equal partner, an important feature for us," Dale said.
 Fannie Mae's participation in the financing plan is part of a $100 million acquisition, development, and construction loan demonstration program approved by the Department of Housing and Urban Development in January 1991. The program was created because builders had difficulty obtaining home construction loans during the fluctuating financial climate of the early 1990s.
 Jim Pugash, president of Hearthstone Advisors, said: "Fannie Mae's investment is a welcome vote of confidence in California's home building industry. Despite all the doom and gloom, California home builders still will build and sell more homes than the next three states in the U.S. combined."
 Greg Schultz, executive vice president of RFC, said: "We at RFC are very pleased to have Fannie Mae join us in this credit facility with Hearthstone Advisors. We decided to invest with Hearthstone Advisors because they have one of the most experienced management teams in the industry. The homebuilding industry in the United States has been devastated by the withdrawal of banks and savings and loans, and we are pleased with the opportunity to be able to provide credit facilities to the homebuilding industry."
 RFC, an indirect subsidiary of General Motors Acceptance Corporation, is an industry leader in the mortgage-backed securities, warehouse lending and housing finance markets and is headquartered in Minneapolis, with offices nationwide.
 Hearthstone Advisors is exclusively dedicated to managing institutional capital in single-family homebuilding. Headquartered in San Francisco, Hearthstone is the largest firm of its type in the United States. Hearthstone pioneered the concept of pension fund investment in homebuilding, and currently has approximately $250 million committed to homebuilding projects in California, which will produce 2,000 single- family homes.
 Fannie Mae is a congressionally chartered, shareholder-owned company and is the nation's largest source of funds for home mortgages.
 -0- 8/25/93
 /CONTACT: Tom Marder of Fannie Mae, 202-752-7608/

CO: Fannie Mae; Residential Funding Corp.; California Public Employees
 Retirement System; Hearthstone Advisors ST: California IN: FIN CST SU: PDT

TW -- DC009 -- 0321 08/25/93 12:00 EDT
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Publication:PR Newswire
Date:Aug 25, 1993

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